Excise And Taxation Commissioner Haryana vs. M/S Bhardwaj Service Station And Another

Held

The Court held that dealers are entitled to ITC on evaporation losses of petroleum products. The reasoning focused on the interpretation of Section 8 of the Haryana Value Added Tax Act, 2003, and Entry 1 of Schedule E. The Court emphasized that Section 8 states input tax shall not include tax paid on goods mentioned in Schedule E when used or disposed of in circumstances mentioned 'against such goods'. It was found that the circumstances mentioned against Entry 5 of Schedule E were not applicable to petroleum products and natural gas, which are covered under Entry 1. The Court clarified that the previous Division Bench judgment in All Haryana Petroleum Dealers Association’s case, while upholding the vires of Explanation (v) to Section 2(1)(zg), did not decide the specific issue of reversal of ITC on evaporation. The Court found no condition in Entry 1 of Schedule E that would disallow ITC on evaporation losses. Therefore, the appeals filed by the State were dismissed.

Facts

These appeals by the Excise and Taxation Commissioner, Haryana, and the State of Haryana, involve multiple petitioners (dealers) and concern tax periods ranging from 2009-10 to 2014-15. The core issue revolves around the eligibility of Input Tax Credit (ITC) for evaporation losses of petroleum products. The Excise and Taxation Commissioner passed orders challenging the dealers' claims for ITC on these losses. The procedural history indicates these are appeals before the High Court, arising from prior proceedings where the dealers likely claimed this ITC, and the Revenue contested it, leading to the present appeals.

Key Issues

1. Whether, under the Haryana Value Added Tax Act, 2003, dealers are entitled to claim Input Tax Credit (ITC) on evaporation losses of petroleum products, specifically motor spirit and High-Speed Diesel (HSD)? This issue turns on the interpretation of Section 8 of the Act and Entry 1 of Schedule E, read with the circumstances specified against such goods. Petitioner/Dealer's Contention: The dealers argued that evaporation losses, given the nature of petroleum products, are inherent and not a disposal of goods otherwise than by way of sale. They contended that the statutory provisions and Schedule E do not preclude ITC on such losses. Revenue/State's Contention: The Excise and Taxation Commissioner argued that ITC on evaporation losses should be disallowed. Their contention, as understood from the judgment, was based on circumstances mentioned against Entry 5 of Schedule E, implying that such losses might be treated as disposal otherwise than by sale, or that the Ministry of Petroleum's allowance for evaporation losses implied a reversal of ITC. They also referred to a previous Division Bench judgment in All Haryana Petroleum Dealers Association’s case, though the specific issue of ITC on evaporation was not the primary subject.